Wall Street Greed Behind Crisis?
A couple of days ago I came across a piece by Washington Post columnist Steven Pearlstein in which he tried to determine if it was excessive greed on Wall Street that was behind the ongoing financial crisis. In case you aren’t familiar with Pearlstein’s work, this year he received the Pulitzer Prize for Commentary for “his insightful columns that explore the nation’s complex economic ills with masterful clarity” at the Post. Anyway, on Friday Pearlstein wrote the following.
The big problem with Wall Street isn’t that it’s greedy—it’s that it keeps making the same mistakes over and over. Each cycle, the masters of finance start out with reasonably good products and good intentions, only to get swept away by their success. They become arrogant, take too many risks and begin to believe their own marketing spiels. Then, when the cycle turns against them and the risks turn sour, they try to cover it up and begin lying to their customers, to regulators and to each other. Trust erodes, and the whole thing collapses.
In the populist “greed” fantasy, it is ordinary people who are the losers while the Wall Street bigwigs walk off with all the loot. But in the real life version, most of the bigwigs lose as well. They lose their jobs, their stock becomes worthless, their reputations are ruined. They spend the next several years shelling out $700 an hour to lawyers to defend themselves against lawsuits and regulatory inquiries and $250 to psychiatrists to help figure out where they went wrong. Bottom line: They wind up worse off than they would have been if they had simply done their jobs well, put their customers first and managed their companies for the long term.
To some, that may be a story of greed. To me, it looks more like old-fashioned incompetence.
Personally, I think it’s a healthy dose of both. And I’ll bet a good portion of Main Street could probably come up with a number of additional negative character traits that could be thrown into the mix…
Hubris?
Source:
“Greed Is Fine. It’s Stupidity That Hurts.”
Steven Pearlstein
Washington Post, October 3, 2008
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